July 2001 Vol. 222 No. 7  International Politics

Jacques Sapir,  Contributing Editor

Putin moves slowly against corruption, ousting Gazprom head

The surprise replacement on May 31 of long-standing Gazprom head Rem Viakhirev by Alexei Miller, a close associate of Russian President Vladimir Putin, has certainly been the ultimate breaking news story in Moscow this spring. At no point was Miller’s name quoted by the Moscow gossip industry. Yet, he was appointed, along with a group of associates, and given a clear mandate about transparency and assets management.

In retrospect, as winter faded, President Putin actually had begun moving on a delayed agenda. The much-awaited government reshuffling took place on March 28. For sure, it did not occur exactly as expected, but such a thing was to be expected in Russia, albeit disappointing. Still, it has not been an irrelevant event.

Alexei Miller

The most visible changes were the replacement of the Defense, Interior and Atomic Energy ministers. Particularly significant was the movement of Serguei Ivanov, Putin’s trusted "right hand," from the National Security Council (NSC) to the Defense Ministry. A closer look reveals that even more people are coming from the NSC to staff ministerial positions and state agencies. For instance, Ivanov took Alexander Moskovskii with him, while the new Minister for Internal Affairs, Boris Gryzlov – the Unity party leader at the Duma – will be helped by another former NSC man, M. Vasyliev. Last but not least, the head of the all-powerful tax police, Vyacheslav Soltaganov, was ousted to make place for newcomer Mikhail Fradkov, yet another NSC man.

Results of Putin’s actions. The meaning of the reshuffling is clear – the "family," this close alliance between Yeltsin’s next-of-kin and the oligarchs, is losing ground. The recently replaced, former Atomic Energy minister, Yevgeniy Adamov, frequently has been nicknamed the "family’s purse" in Moscow. Soltaganov was supposedly close to Roman Abramovich, a powerful oligarch. Soltaganov’s replacement, Fradkov, is deeply respected for his personal integrity and tenacity.

Accordingly, it then took just six weeks to have the new anti-money laundering bill voted on by the Duma. Even if this bill is unsatisfactory on some points, it is still the first one to be passed with huge support of both the parliament and the President. Until now, Russia had been deprived of such a legal basis to fight corruption and financial crime, thanks to Boris Yeltsin, himself, who vetoed a similar bill in 1998. By the same token, both Gryzlov and Ivanov began anti-corruption sweeps at their respective ministries. Last, but not least, in Putin’s corruption-cleansing campaign was the replacement of Viakhirev at Gazprom.

The noise about NTV prevented a clear understanding of what happened in Moscow during April and May. But a media scandal, as ugly as it can be, is not the end of the world, nor are Mr. Gusinsky and Mr. Berezovsky democracy’s angels. Quite clearly, the "family" still holds some power – it has suffered a major reversal but not (yet) a decisive defeat. On the other hand, Putin succeeded at last in getting rid of one of the oligarchs’ most trusted allies, former Internal Affairs Minister Vladimir Rushaylo. This was accomplished after a first attempt failed in September 2000. The presidential administration head, Alexander Voloshin, could be the next in line to be dismissed.

Meanwhile, Ivanov is certainly the man who can best implement the military reforms that Russia so obviously needs. Obstacles are considerable, and resistance is quite strong. However, without such reforms, no political solution will be possible in Chechnya, and the so-called Integrated Security Agreement with some CIS countries will be unworkable. If anyone can succeed in implementing these military reforms, Ivanov will be that man.

The March 28th reshuffling launched a new dynamic that many observers have waited for since last fall. However, it has not (so far) solved the most pending issues. The economy is slowing down, and governmental policy is falling short of popular expectations. This is something that is fueling a resurgence in the Communists’ popularity, even among the population’s younger stratum. Polls show that if a general election were held today, the KPRF and some of its leftist allies would garner a two-thirds majority among people 18 to 24 years old. Thus, Russia is still waiting for a comprehensive, more socially oriented development policy.

Utilities (electric power and railroads) and enterprises like Gazprom need clear management guidelines. The new state-owned oil company awaits a clear definition of its role and status. Integration of economic targets in Russia’s foreign policy needs to be done without the interference of vested interests.

Even if Putin improves Russia’s standing in the CIS considerably – and gains some significant diplomatic successes in Central Asia and the Caucasus – the longer-term policy view is that all gains could be lost. For instance, Moscow failed to get Polish support for a pipeline that bypasses Ukraine. The rebuke will probably not last long because the current Warsaw government is set to lose general elections next fall. The Polish regime is likely to be replaced by a government dominated by former communists who have voiced support for the pipeline project. Nonetheless, for all his forceful talk about European integration, Putin has not yet provided a vision of how Russia can become a part of such a process. Without a clear understanding of what he will do within Russia, Putin is not in a position to address this issue.

The main point that the March 28 reshuffling made clear, is that Putin is not "dead" as a leader. He has not yet been "Yeltsinized" by the "family" or oligarchic pressure. However, he desperately needs some support and would be bereft of loyal lieutenants, were it not for the NSC. Thus, he has stripped that agency of its best men, to gain some control of the government. By doing so, he has made clear a second point – in Russia again, to quote Stalin, "Kadry reshayut Vsio" (Executive men are at the center of all things).

Jacques Sapir is Professor of economics at EHESS-Paris and at the Higher School of Economics in Moscow. He is a regular contributor to this column.